Public Service Loan Forgiveness may no longer be a reality...

[Arantius]

According to several sources and this lawsuit filed by the ABA and four attorneys, the DoE may not uphold its end of the bargain on the PSLF program. Thoughts? Insight? Those of us looking for jobs who were focusing on academics-- does it make financial sense to still stay with academics, or pursue private practice and at what income difference would this be significant?

https://www.americanbar.org/content/dam/aba/images/abanews/PSLF_filing_122016.pdf

https://www.nytimes.com/2017/03/30/business/student-loan-forgiveness-program-lawsuit.html

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[deleted162650]

Ha, people on this forum have been saying not to count on PLSF since the program first came about.

 

[Arantius]

Yep- looks like this is actually coming to fruition...

 

[teeva]

I was told in med school by the fin aid office seminar not to count on the program. That was about the only financial advice we were given before graduation.

 

[sheeed]

Ha, people on this forum have been saying not to count on PLSF since the program first came about.

Blade and quite a few others said this.

 

[aneftp]

Honestly this type of things applies to many govt promises. Remember govt chargers richer people more to pay Medicare part b premiums. So they can do anything they want.

Just wait till they access a "surcharge" on post tax Roth IRA accounts for rich people who with draw over a certain amount.

 

[ambiturner]

Just wait till they access a "surcharge" on post tax Roth IRA accounts for rich people who with draw over a certain amount.

This is exactly what I thought when I read this. I also have little faith in the survival of the mortgage deduction for high earners. You'd have to be nuts to trust that any government program that seems like a good deal will survive.

Even if this loan forgiveness program survives there are a million other ways they can get out of paying up - the easiest being that many academic physicians aren't technically employees of not for profit hospitals but paid by the hospital's "physicians group".

 

[D P356]

"Sure you can trust the government, just ask an Indian."

I had a feeling it wouldn't last.

 

[thinkorswim]

I think folks are making a bigger deal out of this article than it really is. Only those at private non-profit institutions that do not qualify as 501(c)(3) were affected. Those working for government are fine, for now.

The two more important looming problems with these programs are the unanticipated large number of folks who expect their loans to be forgiven (I expect the government scale back on this in few years) and the massive tax bills those individuals will be hit with if their loans ever are forgiven. That'll be a fun day.

 

[doctorFred]

yup.. the article fails to mention that one of the plaintiffs actually works for a 501(c)19, not a 501(c)3, so technically the government could weasel out of this one on a technicality. if you work for the government, or a 501(c)3, you're probably still in the clear (for now).

 

[aneftp]

Loan forgiveness makes sense for only a few specialities like lower paying ones. I mean I guess if u owe $300k and up and in peds or family practice or psych it may make sense.

But u still end up with a $100k plus tax bill on the forgiven loan. And u likely can make more than the $200k actual forgiven debt (adjusting for taxes owed) in less than 5-6 years in private practice even in lower paying specialities.

Just my opinion.

The law students who owe a lot. Yes. I can see why they are suing. Cause being a lawyer is hard in terms of starting out careers. They be lucky to make $50-70k starting out unless they graduate from top schools even in private practice

 

[AdmiralChz]

Agree less dire for physicians, they have a high earning potential. The monthly payment is tied directly to salary, though.

But, for example., those who have bachelors and then masters in education who top out in secondary or college advising with 40-50K would be disproportionately affected. This is a tenth of what many subspecialty physicians make - a major issue.

 

[Shimmy8]

Pretty sure it's "supposed" to be non-taxable.

I mean these things can change..:

 

[Robotic Wis-Hipple]

Picking a job for the purpose of continuing to pay under IBR (while interest continues to compound) and hoping the Govt in this era of gross expanding debt and wealth redistribution will forgive the loans of high earning 1%ers is beyond fantastical logic.

I'll never see the Govt forgive my loans just like I'll never see a cent of social security.

 

[Light at end of tunnel]

This blows

 

[berlog]

So what do you guys think people should do. I'm on the PSLF track and have made 54 qualifying payments already. I would qualify in 2022. Currently on REPAYE and making payments on just interest to minimize payments. The concern of course is that I would make 6 years worth of interest payments and then something happens to this program. That would mean 6 years of not paying towards the principal. A very concerning situation indeed.

 

[ambiturner]

So what do you guys think people should do. I'm on the PSLF track and have made 54 qualifying payments already. I would qualify in 2022. Currently on REPAYE and making payments on just interest to minimize payments. The concern of course is that I would make 6 years worth of interest payments and then something happens to this program. That would mean 6 years of not paying towards the principal. A very concerning situation indeed.

Are you an attending? I would double and triple check that your current gig meets all the requirements and that you are still on track. If they say you're good then hopefully you are. Even if so, save as much money as possible so if they limit the repayment or impose taxes you can pay it down quickly (best case you'll have a big pile of money).

 

[aneftp]

What exactly are u docs who are in this program doing with the "extra" payment u would have been making.

Say u normally would be paying $1000/month in student loans. But under repayment just paying $200/month.

What exactly are u doing with the extra $800 u would have been paying into the student loans?

That's the issue. Don't assume the program will last. Use the extra money u would have had to repay wisely.

 

[Arantius]

What exactly are u docs who are in this program doing with the "extra" payment u would have been making.

Say u normally would be paying $1000/month in student loans. But under repayment just paying $200/month.

What exactly are u doing with the extra $800 u would have been paying into the student loans?

That's the issue. Don't assume the program will last. Use the extra money u would have had to repay wisely.

What if someone took a job for lower pay while counting on this as an option? They might not have the extra 800 a month? From what I read in the documents the letters the DoE sent stating that the borrowers worked for a qualifying agency and/or made 'x' number of qualifying payments were rescinded and basically the DoE said they could renege on those qualification letters any time. I am in a similar boat-- have made 7 years of qualifying payments and looking for my first attending job. I was looking at academics to close out the 3 years with fairly low income offers (150-180k) but maybe I should just go for private practice and build up a nest egg that I wouldn't be able to build if I was at the lower income bracket. I have 2 kids to worry about and the thought of still holding loans myself when they get to college age makes my stomach turn.

 

[aneftp]

What if someone took a job for lower pay while counting on this as an option? They might not have the extra 800 a month? From what I read in the documents the letters the DoE sent stating that the borrowers worked for a qualifying agency and/or made 'x' number of qualifying payments were rescinded and basically the DoE said they could renege on those qualification letters any time. I am in a similar boat-- have made 7 years of qualifying payments and looking for my first attending job. I was looking at academics to close out the 3 years with fairly low income offers (150-180k) but maybe I should just go for private practice and build up a nest egg that I wouldn't be able to build if I was at the lower income bracket. I have 2 kids to worry about and the thought of still holding loans myself when they get to college age makes my stomach turn.

This thread primarily involves MD and MD salaries doing loan forgiveness. Have no clue what u were doing with 7 years of qualifying payments but I'm 100% sure u weren't doing MD work if u are looking at ur attending job.

Just talking about md salaries. The loan forgiveness program isn't that good of a program.

The program biggest bang for the buck involves those with high college/grad school debt to working income ratio. And MD career offers much better debt to income ratio. So the program doesn't make sense to 90-95% of ANY MD specialities.

 

[Arantius]

I had 3 years working in the military after getting an ugrad degree and then 4 years residency= 7 years...

 

[Robotic Wis-Hipple]

You should not take a job with the intent that the Govt is going to let you off the hook years down the road.

Take the job you want, refinance, and pay your loans off. Sure, there's a chance you pay money that the Govt would've forgiven (with a huge poison pill tax bomb) but it's much more likely you spend years paying less than your normal payment amt, while your principle continues to swell with compounded interest, and the Govt cancels the program or tells you MD's don't count.

I think even if you worked at a qualifying hospital the DoE would use the loophole that Anesthesia services, or many other specialties, are contracted services and not direct hospital (or academic program) employees.

 

[Shimmy8]

The program is a hell of a deal for folks with REALLY high debt (like 600k+) who did a long residency with fellowship. Anesthesia doesn't fit that bill, but if I only had 3 years left I'd strongly consider taking an academic job that pays and use any "extra" money toward other debt.

Be careful with these academic jobs though, some places get dual payment as attendings from both the medical school and the hospital, and the hospital may be structured as a private entity. A few new grads at my place found this out the hard way when their PSLF was denied.

 

[WheezyBaby]

Doing a peds subspecialty looking at 7-9 years of postgrad training. Fingers crossed holding out hope. Don't know why someone in anesthesia would do it though, refinance and pay it off fast

 

[aneftp]

This along with 457b retirement plans offered by "nonprofits"

Unless it's a true state own or government run facility. DO NOT PUT ANY money in any 457b plan. U will find out the hard way when u cannot roll that 457b plan over and pay taxes on it immediately.

The wording of non profits and government often times are interwine. And it's not.

 

[Pharmado]

Some people rely on this with little hope that they will be able to pay off student loan debt in a timely manner. For instance, a friend of mine went to a private dental school in California. He is now finishing his residency in oral surgery with just over a million dollars in student loan debt. His debt increases by $5500/month. He could get out of debt eventually, but even with a 500-600k/yr job, he's facing a very difficult road to pay off his debt before retirement. It does seem overly generous that they would forgive his entire million dollar debt, but that's the promise they made.

Perhaps a more reasonable plan would have been to make peoples loans interest free after a certain number of years. They would still be responsible for paying off their debt, but they could do so with the knowledge that they are paying towards the principle and getting closer to freedom every month.

 

[deleted162650]

Hell, I'd be happy if I just got to pay them with pre-tax dollars. How they are not considered a "business expense" is beyond me.

 

[Arch Guillotti]

DO NOT PUT ANY money in any 457b plan. U will find out the hard way when u cannot roll that 457b plan over and pay taxes on it immediately.

???

So just leave it there.

 

[aneftp]

???

So just leave it there.

What I mean is 457b are all not the same. There are severe restrictions if u leave a nonprofit 501 (c) that offers it. It very hard to roll over.

Only if you work directly for the state government or local government entity is that 457b easily rolled over. Many hospital employed "non profit" offer 457b as another tax advantage account. But u gonna to find it hard to roll that 457b money over unless u jump to a job that is a government local or state that offers the 457b

"Rollover provisions are more liberal for a government 457(b) plan than for non-government 457 plans."

457(b) - Bogleheads

 

[deleted547339]

Some people rely on this with little hope that they will be able to pay off student loan debt in a timely manner. For instance, a friend of mine went to a private dental school in California. He is now finishing his residency in oral surgery with just over a million dollars in student loan debt. His debt increases by $5500/month. He could get out of debt eventually, but even with a 500-600k/yr job, he's facing a very difficult road to pay off his debt before retirement. It does seem overly generous that they would forgive his entire million dollar debt, but that's the promise they made.

Perhaps a more reasonable plan would have been to make peoples loans interest free after a certain number of years. They would still be responsible for paying off their debt, but they could do so with the knowledge that they are paying towards the principle and getting closer to freedom every month.

Your friend is an idiot to take on a million dollars in debt.

 

[Arch Guillotti]

What I mean is 457b are all not the same. There are severe restrictions if u leave a nonprofit 501 (c) that offers it. It very hard to roll over.

Only if you work directly for the state government or local government entity is that 457b easily rolled over. Many hospital employed "non profit" offer 457b as another tax advantage account. But u gonna to find it hard to roll that 457b money over unless u jump to a job that is a government local or state that offers the 457b

"Rollover provisions are more liberal for a government 457(b) plan than for non-government 457 plans."

457(b) - Bogleheads

So just leave it there.

 

[aneftp]

So just leave it there.

U don't have the option at many places. My sister left her hospital employed job last year and had 90 days to move that 457b money to either another non profit/457b or that money has to be with drawn.

So she ends up with a huge tax bill since her new job was with private group.

That's what I meant by not being tempted to take advantage of every pretax account. 457b have a lot less flexibility unless u work directly for the government (state/local/Feds).

And this ties to the entire thread of student loan forgiveness where people work for nonprofits and not directly for the federal (Va/military/Indian reservation etc) and potentially finding that their loans won't be forgiven.

 

[zero0]

... To absolutely no ones surprise.

No one should be blind-sided by this. Relying on PSLF was just wishful thinking in the absence of a real plan anyway.

 

[d9sccr]

I think most would be surprised by how many of my classmates were taking on un-needed debt in the face of a doubling interest rate because of PSLF...just crazy

 

[psychMDhopefully]

So what do you guys think people should do. I'm on the PSLF track and have made 54 qualifying payments already. I would qualify in 2022. Currently on REPAYE and making payments on just interest to minimize payments. The concern of course is that I would make 6 years worth of interest payments and then something happens to this program. That would mean 6 years of not paying towards the principal. A very concerning situation indeed.

Have a lawyer verify everything 1000 times. Get some kind of legal agreement written up and sue the hell out of them if they break contract, I'm sure others in your situation are thinking about doing this. If stuff looks too shady, just reasses and figure out a way to pay off your debt asap to stop interest from building up

 

[rakotomazoto]

A million into debt? Your friend made me feel much better about the hole that I have dug for myself. There is no question that the first wave of people who apply for forgiveness are going to have a hard time and it seems highly unlikely that PSLF with be around in a few more years. Why would the government give up so much money from such a compliant group of scapegoats as doctors? We are swallowing MACRA, HCAPS, and plenty of other ridiculous pills. Why would the government roll over and starting paying off millions of dollars of our debts? If something seems too good to be true, it usually is.